The Hindu Business Line : `Time to come out with FDI-based ties with Japan'

THE Associated Chambers of Commerce and Industry (Assocham) has suggested that Indo-Japan bilateral trade relationship should shift to foreign direct investment route rather than being only official development assistance (ODA) based.

Echoing these views in a paper on `India-Japan economic relations: Steady past and bright future', the chamber said that the ODA-based relationship has not strengthened the weight of Indian currency and has "rather weakened it".

While releasing the paper, the Assocham President, Mr Mahendra K. Sanghi, said, "the time has come that India aggressively campaign for FDI-based relationship with country like Japan."

Mr Sanghi said that in the changing economic scenario, the shift of India-Japan relationship from ODA to FDI based is also called for to promote Japanese investment in infrastructure sectors such as telecom, power and construction, besides increased manufacturing in automobile sector.

As per the chamber's estimates, Japan has so far provided approximately Yen 3000 billion commitment base under ODA while Japanese actual approved FDI's until 2003-04 stood at less than $ 4000 million. Some of the recent ODA packages in India include Delhi Metro Railway, Yamuna action plan and few projects in power sector.

Mr Sanghi argued that ODA aid has not spurred the Japanese manufacturing in India and restricted the scope of acceleration of economic activities as a result of which both the countries have not succeeded in building economic partnership.

The continued preference of Japan on its ODA aid to India has even resulted for decreased two-way trade between India and Japan as compared to China with whom India's trade increased by over 280 per cent in 2003-04 from its earlier level of 1997-98. India's trade with Japan, however, increased by 7.9 per cent between 1997-98 and 2003-04.

"Keeping this in view, the need of hour is that adequate efforts are initiated to persuade Japan to diversify its FDI approach towards India and not to concentrate its investments only in automobile and consumer durable sectors," the Assocham chief said.

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